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Possible implications of Brexit in Competition law

It should be noted that implications of a Brexit vote will be dependent upon the outcome of the exit negotiations that would take place following the submission of Britain's notice to leave the EU (e.g. will Britain remain in the single market at least to some extent?).

Post-Brexit, any UK businesses which offer or propose to offer goods or services in the EU will continue to be bound by EU competition law.

UK competition law is largely based on EU Competition law legislation and is unlikely to change fundamentally as a result of Brexit.

The EU would lose its legal jurisdiction over UK law.

The UK would no longer be able to have input in shaping EU competition law and would no longer be able to contribute to the decision-making process for Commission cases.

In terms of enforcement and its deterrent effect, the UK agencies at a national level have traditionally been less active than the Commission in respect of enforcement action for anti-competitive behaviours (e.g. between 2007 and 2012 (inclusive), the UK authorities made 7 decisions and imposed fines of around half a billion pounds while the Commission made 42 decisions imposing fines of approximately 15 billion Euros in the same period). Following Brexit, there would likely be higher compliance costs. UK authorities would likely have to become more active where there are EU investigations with UK implications.

Cartels

There is a prospect that we would have parallel regulation and therefore possible fines under both the UK and EU regimes. Undertakings involved in cross-border cartels covering both EU countries and the UK would face separate investigations by both the Commission and the CMA. This could lead to regulatory uncertainty and double jeopardy issues.

The Commission would not have jurisdiction to conduct dawn raids on business premises situated in the UK.

It is likely however that the CMA would coordinate its enforcement activities with the Commission in a similar fashion to the coordination with agencies outside of the EU which it currently has in place (e.g. with DOJ and FTC in the United States).

Merger Control

Companies would remain subject to EU regulation if the deal was "cross-border" with EU Member State meaning that companies would still need to be mindful of the EU thresholds.

The UK would lose its entitlement to seek to "call in" a merger (under Article 9) for UK consideration where the effects of an EU merger were expected to be experienced in the UK.

The UK would have a distinct merger clearance procedure from the EU (which grants EU-wide clearances) so the "one-stop shop" rule would no longer apply. It is therefore likely that companies would have to undergo an additional merger review by the CMA running in parallel to the EU merger review. This would add to transaction costs and regulatory uncertainty.

The CMA may have a more economics-weighted approach than the EU.

Private Enforcement

The UK is currently viewed as a claimant-friendly jurisdiction for private damages follow-on actions of infringement decisions of the EU Commission. The status of these decisions post a Brexit vote would depend on what deal is struck with the EU. If we continue to be a member of the EEA, then EU competition law and EU Commission decisions could still be binding on UK Courts. There is a risk that the more ‘detached’ the UK is from the EU, the less attractive our courts would be for follow-on damages.

In terms of application of the law, it is unclear to what extent (if at all) UK courts would continue to follow the findings of the EU courts.

State Aid

Most would argue that the possible implications of Brexit for state aid are dependent on the outcome of any exit negotiations that the UK with have with the EU upon exiting the EU.

If the UK exits the EU without a special trade agreement with the EU in place, it may mean that the UK would fall outside of the EU state aid control system.

This would theoretically mean that the UK Government would have greater freedom and discretion in giving aid to UK businesses (and by extension, greater political interference in the market and even preferential tax treatment to international companies).

The UK (and UK businesses) would also find it more difficult to complain to the Commission about EU Member States distorting competition as a result of state aid which that EU Member State has granted. The Commission would continue to govern and enforce the state aid rules, which would continue to be binding on all remaining EU Member States.

In contrast, if the UK negotiates an exit which would allow it to continue trading as part of the single market (or at least close to it), it is possible that the remaining EU Member States may well insist that the UK implements equivalent state aid measures under national law to prevent market distortion.

Compare jurisdictions: Merger Control

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